Late last month, I found myself staring at a spreadsheet that told a story few in the bull market are willing to face. A mid-tier ZK rollup operator, flush with a recent $50 million Series A, had published their Q1 financials. On the surface, everything looked golden: transaction volume up 340%, total value locked hitting new highs, and a token price that had doubled. But beneath the surface, a quiet hemorrhage was underway. Their net profit, after accounting for proving costs, was negative. Not slightly negative—deeply, structurally negative. They were bleeding cash on every single batch of transactions they posted to Ethereum.
This isn't an isolated incident. Over the past month, I've been auditing the economics of four major ZK rollups, digging through their on-chain data and public disclosures. The pattern is consistent. In the current bull market, where gas fees on Ethereum mainnet have surged past 50 gwei, ZK rollups appear to be the hero we need—offering cheap, fast transactions with the security of Ethereum. But the hero is burning out faster than the hype cycle can sustain. The proving costs, the computational heavy lifting required to generate validity proofs, are eating these teams alive.
To understand why, we need to step back. ZK rollups, as a Layer 2 scaling solution, batch hundreds of transactions off-chain and then submit a single validity proof to Ethereum. This proof, often a zk-SNARK or zk-STARK, mathematically guarantees that all transactions are valid. The elegance is undeniable: unlike optimistic rollups that rely on a seven-day fraud proof window, ZK rollups offer instant finality. But beauty comes at a price. Generating these proofs requires specialized hardware—often high-end GPUs or even ASICs—and significant electricity. More importantly, the recursive nature of modern ZK proofs means the computational cost scales not just with the number of transactions, but with the complexity of the state transitions. As DeFi protocols on these rollups become more intricate, proving costs balloon.
Let me put some numbers on this. Based on my analysis of the operator I mentioned earlier, the average cost to generate a proof for a batch of 500 simple transfers was roughly $120 in cloud computing resources. At the current Ethereum gas price of 60 gwei, the L1 verification cost for that same batch adds another $15. That brings the total cost to $135. The operator, however, was charging users an average fee of $0.15 per transaction. For 500 transactions, that's $75 in revenue—leaving a $60 loss per batch. Multiply that by the 2,000 batches they process daily, and you get a daily loss of $120,000.
The bull market masks this because the token price appreciation and venture capital inflows cover the operational deficit. But this is not a sustainable business model. The core insight is this: unless Ethereum gas prices remain at bull-market highs forever, or the operator can dramatically reduce their proving costs, they are running a charity, not a protocol. The moment gas prices retreat—say, after a market correction or a major L1 upgrade—the relative cost advantage of ZK rollups vanishes, and the operator will be forced to either raise fees (killing user adoption) or subsidize losses until their treasury runs dry.
The contrarian angle that many miss is the belief in economies of scale. Proponents argue that as more users join, the proving cost per transaction will drop due to batching efficiencies. Technically, that is true—but only up to a point. The problem is that batching larger sets of transactions requires more complex proofs. Each additional transaction adds a non-linear increase in proving time and memory. I have seen projects that claim to handle millions of transactions per day, yet their testnet benchmarks show that proving a batch of 10,000 transfers takes over an hour on a top-tier GPU rig. That's not scaling; that's a bottleneck. The technology is not ready for mass adoption at current cost structures.
Meanwhile, the market's attention is fixated on token price and TVL. The narrative of 'ZK is the future' has become a self-fulfilling prophecy of inflows, but the structural integrity of these projects is being ignored. I recall the 2022 bear market, when Terra and FTX collapsed, I wrote about the importance of neutral infrastructure and the danger of building on shaky economic foundations. The same lesson applies here. The code is open and verifiable, but the economic model behind it is fragile. From the ashes of FUD, we forge true adoption—but we must also forge viable business models.
Take, for example, the race to deploy ZK rollups on Bitcoin via BitVM. The concept is elegant, but the proving costs on Bitcoin are even more prohibitive because Bitcoin's script language is limited. As I've argued before, BRC-20 and Runes on Bitcoin are like using a Rolls-Royce to haul cargo—it insults the car and doesn't carry much. The same applies to ZK rollups on Bitcoin: we are layering a computationally expensive system onto a network that was never designed for it.
My five years of experience in this industry have taught me one thing: sustainable protocols are built on economic realism, not narrative hype. The 2017 ICO boom was fueled by whitepapers that promised the world but delivered little. The 2020 DeFi summer gave us yield farming, but many protocols collapsed under the weight of flawed tokenomics. Now, in 2025, we risk repeating the cycle with ZK rollups that burn cash in the name of progress.
The opportunity here is not to abandon ZK technology, but to focus innovation on the proving layer itself. We need more efficient proof systems—hardware acceleration, better recursive proof compression, and novel algorithms that reduce the computational overhead. Until then, we do not follow trends; we architect ecosystems that can survive the inevitable winter.
Volatility is the tax we pay for freedom, but operating losses are a tax we should not tolerate. The next bull market will not reward the flashiest L2; it will reward the one that can prove—both mathematically and economically—that it can last. The code is open, but the vision is ours to build. Let us build it on a foundation that doesn't leak.
